Decentralized Resiliency: The Story of BadgerDAO w/ Spadaboom (BadgerDAO)

[00:00:00] Hello and welcome back to the Strange Water Podcast. Thank you for joining us for another episode.

[00:00:24] While many innovations in our industry elicit very passionate opinions, perhaps no discussion is more hard to pin down than the one around decentralized autonomous organizations or as you probably call them, Dows.

[00:00:40] The history of Dows is super interesting. Before there were Dows, there was V-Dow. Now the first Dow is an epic story that had wide-ranging consequences for Ethereum and for cryptocurrency, but it's a little off topic.

[00:00:59] Those interested can check out episode 19 of Strange Water, but suffice to say that even from the day the first Dow was deployed on chain, there were very strong opinions on all aspect of Dows.

[00:01:15] When I find the conversation has become more noise than signal, I always find it useful to turn to the data. And so as we turn towards today's guest, we are looking for a Dow that can tell us the whole story from what it means to achieve greatness and to overcome adversity.

[00:01:37] And, most importantly, a Dow that can bind a community together through the depths of a major hack and through a brutal bear market and emerge still vibrant and shipping.

[00:01:53] Today I am pleased to announce Spada Boom, the co-founder of Badger Dow. Badger was launched in 2020 with a simple mission. Build the products and infrastructure necessary to accelerate Bitcoin as collateral across other blockchains.

[00:02:11] Put simply, Badger Dow deploys Bitcoin into DeFi. Today we'll walk through the history of Badger Dow with a specific eye towards how the Dow impacted the growth of the protocol.

[00:02:25] We cover the implication of decentralized contribution and the mindset needed to build a strong community-oriented enterprise.

[00:02:36] And we talk through what it's like to experience a nine-figure hack and how to shepherd a community through the darkness.

[00:02:44] But don't worry, we end on a high note. Just this week Badger Dow has launched its latest project and signaled a new age for the protocol.

[00:02:55] E-BTC will allow users to mint a BTC derivative using their staked-eat collateral, paving the way for a much wider, much more permissionless adoption of BTC in DeFi.

[00:03:09] One more thing before we begin. Please do not take financial advice from this or any podcast. Ethereum will change the world one day, but you can easily lose all of your money between now and then.

[00:03:24] Alright, let's go to Spada Boom.

[00:03:34] Spada Boom, welcome to the Strangewater Podcast. Thank you for joining us.

[00:03:37] Thanks for having me, man. Excited.

[00:03:39] Of course. So I'm super excited to talk about Badger mostly because of like the incredible stuff that's going on this week.

[00:03:46] But I guess, you know, taking a step back. First of all, I'm a huge believer that the most important part of every conversation are the people in it.

[00:03:54] And then especially with the context of Badger and this new product, I think that the most important part of this conversation is the story of how we got here.

[00:04:03] So let's start this off a little bit by can you tell us a little bit about yourself and eventually how you found crypto and then made it to Badger and started a BTC DeFi on Ethereum protocol?

[00:04:15] Yeah, for sure, man. So, you know, I was enthralled with Bitcoin. I've always been, you know, kind of this believer that I want to say anarchistic, you know, perspective more libertarian for sure.

[00:04:30] I just never believed in the confimance of societal norms and how we're supposed to live our life and broke away from that early.

[00:04:37] But it was those kind of societal norms that brought me to Bitcoin because, you know, born and raised in Toronto and lived here the majority of my life.

[00:04:47] And in the early 2010s, I, you know, was in tech sales, you know, doing a lot of things around when Amazon Web Services came out and Azure and so forth and so on.

[00:04:59] And I moved to New York and I was working there and it just will happen that my office was on top of the original Bitcoin Center, which was on Wall Street.

[00:05:09] If you remember that from the, you know, the documentaries and stuff. So I used to go down there, you know, good friend of mine from Toronto really got into Bitcoin and used to go down there and sell spreadsheets on the wall and my live auctions and stuff and like some of the first, you know, miners were coming out there.

[00:05:26] It was cool. It was cool stuff, but that's what I, you know, I started to realize that there was more, but I didn't really take the full plunge kind of the classic story for many.

[00:05:36] And I still probably own the Bitcoin that I bought then in 2013. So I definitely, you know, a diamond hand. There's no doubt about that. But, you know, I didn't, I didn't really go deep in working full time until 2016.

[00:05:52] I moved back to Toronto, kind of had like a really good experience like accelerating my career and then deciding to travel and spend time like, you know, with my wife and just kind of, you know, get our heads in order and just think about life differently.

[00:06:08] And then when I came back to Toronto, it was pretty quickly after, you know, Ethereum accelerated. It was shortly after the serum came to market. So, you know, the city was on fire, right?

[00:06:19] With E and started, you know, started going to do more consulting. I started just helping projects that were, you know, looking at the time to do token launches and stuff along those lines.

[00:06:30] And then that's where I really started to get my wits about me and got much more involved. And of course, you know, then came the ICO boom and all the craziness and instilled there.

[00:06:40] But it was really the time after that that I think shaped what eventually became, you know, badger because, you know, it was after that bull run in 17.

[00:06:49] That was one of the first experiences I had in building business in the space where your business gets decimated with the market, right?

[00:06:57] Like as it's one thing to like lose a lot of money. I think we've all gone through that a lot of times if you've been through a few market cycles.

[00:07:03] It's another thing to invest in Romas Mototime Energy into business and have that business find, you know, some fit and acceleration just to be totally destroyed because the market was destroyed.

[00:07:13] And, you know, it just there was no demand for that business and that service anymore.

[00:07:19] So it was in 2018 through 29th and 2020 where I continued to provide more advisory and like hands on services to different projects.

[00:07:30] But it's there that I got the exposure to what was the kind of the early days of C5.

[00:07:36] And it was at that point that I realized that I needed to be more of a mover of change in creating transparency versus a participant.

[00:07:46] And it was in kind of late 2019 that I decided that I wanted to build something and I wanted to build something that allowed myself and my friends and others to put their Bitcoin to work.

[00:07:57] Why don't you take us to this time when your like sounds like 2019, 2020 is when Badger is like first coming together. You're bringing the initial team.

[00:08:07] Like what is the problem that you're trying to solve and then like what is the solution that you like first built in order to achieve that?

[00:08:15] The problem we're trying to solve is to make it to make it easy for people and to actually have things to do with their Bitcoin in apps on Ethereum.

[00:08:25] Right. That was like in the first product that we thought could do that is a yield product.

[00:08:30] So we built a variety of yield aggregation vaults as we called them that back then if you remember us akin to what yearn kind of spearheaded and it was built on top of, you know, common liquidity mining frameworks like curve and then eventually come back and and a few others.

[00:08:52] But it was really deposit, you know synthetic Bitcoin assets like at the time WBTC T BTC Rambit DC versions of BTC and maximize your yield.

[00:09:05] And that eventually then became well let's get more Bitcoin over how do we have a real impact on driving Bitcoin into the ecosystem and we built a bridge and then there was a variety of other things but that's pretty good.

[00:09:20] We started with Rapps. Yeah, okay, so in the beginning you the idea is essentially like we understand all this crazy stuff is happening on Ethereum with DeFi and we see that there's this asset that like isn't really part of the ecosystem.

[00:09:34] And so step one is at first you weren't bringing any native BTC into Ethereum ecosystem. You are using like these other providers like WBTC Rapp or RNBTC, so that's correct right.

[00:09:47] Right.

[00:09:48] And I guess like what was that moment where you realize that this isn't viable just like collecting other people's BTC like tracking tokens like we need to create a bridge on our own.

[00:10:00] Yeah, the bridge inherently still used the underlying tracking tokens. It was based on Ren VM which I think we know, you know, it's collapsed since so we took us a while to learn that lesson right.

[00:10:14] So we built a variety of products and so it was like yield vaults bridge then we moved into an interest bearing Bitcoin. We obviously had a rebasing Bitcoin in between there.

[00:10:25] And so we had a lot of things that we didn't know about. And so we were like, I guess maybe this is like the next part of the story or maybe we're really addressing the part that we really talked about but

[00:10:50] it sounds like you were just like iterating as fast as possible and like dumping out new products like really like the moment that you realize the last one wasn't working.

[00:11:00] Do you know with the benefit of hindsight, like what was the experience like of just like dumping out as many iteration as possible.

[00:11:09] Do you think that that was helpful in trying to find product market fit. Do you think that ended up like creating more noise and like fracturing just like the enthusiasm of the community, like talk to me through what it's like to build a Dow that like just like delivered so much in such a short amount of time.

[00:11:27] I'd say that you know for.

[00:11:30] For us, it was very different than a more traditional approach to you know web to development and bringing software protocols to market and MVP's in these quick iterative cycles because it was a Dow and it was a Dow from the beginning.

[00:11:46] You know between December launch in 2020 and May of 2021 it went from two to 50 people that are working full time.

[00:11:57] And most of these people never met each other before it was ready, it was still COVID time so everyone was remote.

[00:12:04] And everyone was just contributing because they believed in kind of the direction and products and protocols kind of form their own pods and there was different groups focused on these different things and bringing them to market so much less of this calculated bring a protocol out if it works great.

[00:12:22] Brom with it if it doesn't work kill it move forward, it was actually that would have been a lot easier significantly easier but instead because of that kind of open collective approach.

[00:12:34] You were bringing things to market and you didn't have kind of the wherewithal to really determine how much of a fit these things have been.

[00:12:44] And also on top of that because of the lack of kind of native yield and abilities to create yield so much of from Bitcoin in particular.

[00:12:54] So much of the products relied on kind of these unique incentives that could be brought to market which I think is very beneficial in general and token distribution terms and there's a reason there's 35,000 token holders and all that type of stuff and I think that's very beneficial at the same time it's.

[00:13:13] It's a big challenge so we found ourselves as a as a that was a whole you know spending an enormous amount of capital.

[00:13:22] A lot of products that didn't have product market fit and were using kind of extraordinary extraordinary incentives to kind of keep them afloat

[00:13:33] and the lack of motivation to really scrutinize you know the viability of these protocols products and then doing that all in like while literally trying to create how a Dow should operate right like we didn't have any frameworks none of this stuff was there at the time.

[00:13:50] And that involves a lot of like energy and effort and like that's almost an entire project in its own right like how to you know appropriately effectively operationalize 50 to 100 strangers online in building software that has very high risk of security vulnerabilities and you know a lot of capital that flows in instantly and all this type of stuff.

[00:14:16] So it was a very very difficult challenge and we can get to kind of what it looks like on the other side because pretty much like pull back the curtain in 2022 and 2023 and like ripped everything to the studs to be able to even survive the bear market but regardless like to answer your question it was it was different than this iterative approach and it was in hindsight very very painful and I could have done it quite a bit differently.

[00:14:45] I wish there could have been a lot more focus on one thing at a time and getting things and giving more swings at and time and attention on how you evolve that thing versus trying to now support this next thing and then trying to support the next and now you're supporting four things and then you have tech that like all that stuff.

[00:15:09] Yeah, I mean that's super interesting and quite frankly like you're one of few people that I've heard reflect on like the most their most Dow time as something that brought like a lot of challenges and maybe like led you in a direction that was a lot more painful than it needed to be.

[00:15:27] And I guess like I would love to hear looking back I mean if you could do it all over again knowing what you know now do you think that

[00:15:36] like the Dow the Dow is like an appropriate structure for this type of like high stakes high risk software development like do you think that really the problem you had was more about like organization and like with a little more structure it would have worked out great like what are the big takeaways in the lessons you learn from this experience.

[00:15:56] Well, I don't think if there was more structure that it would have worked out differently. I think there are one of the biggest things that misled us and a lot of the contributors is that we thought there was a lot of appetite to use BIC.

[00:16:12] But when you peel back the onion to put a perspective like there was two entities that are now defunct that were responsible for minting more than the entire WBTC supply that sits on me in a tip.

[00:16:26] And that's still a tenor fifteen billion dollar tenor twelve billion dollar you know asset in the top twenty cryptocurrency in the world.

[00:16:34] And that was only meant to both were permissioned KYC bridge so there wasn't like tens of thousands of people like saying oh my god I got to go to a theorem to use my Bitcoin that was never the case ever.

[00:16:47] But on paper it was like we're starting in WBTC is fifty million and then by middle of twenty twenty one it's twenty billion you assume and more like more than one percent of the Bitcoin supplies now tokenized you would just assume that the time has come.

[00:17:02] And I think that was one of the biggest learning curves for us because the waterfall effect of you know the fact that there really wasn't that many users and there really wasn't the ability to sustain any type of like yielding.

[00:17:16] Or utility environment they give you look at where it's gone today you know Bitcoin on a theorem like seventy five to eighty percent of all WBTC which is the largest market share of tokenized Bitcoin sits in money markets borrowing dollars on a theory almost all of this just uses collateral that's really the extent of it indoor settlement and trading.

[00:17:44] And then you know on different pairs and things along those lines so it that's where it ended up being after all these groups and all this capital all this time and all this investment went into trying to build an ecosystem for Bitcoin utility on the most prominent infrastructure for defy in the world and you know sixty percent of the WBTC supplies down from where it was at its peak.

[00:18:09] And then you know the left with it being used almost exclusively as a collateral asset to borrow dollars so I think that was one of the biggest lessons on the operational side.

[00:18:19] I think it's hard to say you know we could have done right things different because it was such a green space right that it was so early in those days and badges evolved so much since then and I think if we would have been able to have a framework that we have today.

[00:18:38] Then that would have been enough to kind of stunt some of the inefficiencies that can come with that so that you know this is badgers move more to a representative democracy where there's different councils and these councils are more specialized and token holds kind of over have an overview of the decisions that are being made and veto rights but it is really more specialized groups that are making making focus decisions in given areas with.

[00:19:07] Much more is much more information to make those decisions and and then there's also like the underlying financial reporting infrastructure that exists now that before you you couldn't even determine like a profit and loss right or anything along those lines so I feel like you know.

[00:19:27] I feel like you know there was a move to complete openness I think very fast and if it was a bit slower I think that would have maybe helped us get to the place that we are today and there's still a lot of inefficiencies and representative democracies as well and like one to one token voting and and all that stuff but in terms of like how that has an impact on protocol and product development in such an emerging space.

[00:19:55] I feel like there were both gigantic challenges that even if it wasn't a doubt you would have still faced an enormous amount of challenge on you know this very immature new like very almost no protocols found product market fit like there's really like two or three like it's like liquid staking taxes stable coins and money markets are probably the only thing that you can kind of speak to and there's like a dominant player in each of those so like of all the things that you can do is like a lot of the same thing.

[00:20:25] So I think all these hundreds and thousands of builders and companies most of them didn't find product market fit and a lot of the excitement and momentum around defined whatever I think it was more for like the existing killer app in crypto which is like speculative trading on you know new assets and stuff so I do think that even if it wasn't a doubt there would have been challenges and even if you could find product market fit the Dow challenges

[00:20:54] what has still been there and it would have just been you know a very challenging thing to navigate an enormous crew from the ground up.

[00:21:02] Well let me ask you the direct question and sorry the first half of your answer was about like the demand side and we'll get back to that when we talk about like ebTC and like the amazing things that are happening today but just on this like Dow question and on this like with the benefit of hindsight if you could go back and do it again would you run it as a dour would you run it as a company?

[00:21:23] I would 100% run it as a doubt.

[00:21:26] And why is that because what I'm hearing from you is that like just introduce so many challenges and like non-focus like inability to focus and just like chaos so I would love to hear like the benefits of the Dow.

[00:21:39] The benefits of the Dow are the benefits of crowdsourcing information on the internet right it's the power of as much as it's a bunch of strangers that don't know each other come together if you're driven around a specific vision and mission that could be exceptionally powerful at crowdsourcing information and you know overall participation

[00:22:04] from participants with so many different perspectives that probably would have never came together and pushed towards you know something right real.

[00:22:15] And again I think that Dow's are amazing right on chain collectives of humans working are really really amazing and doing it completely on chain with absolute transparency is a big innovation really in its own right compared to you know what we do.

[00:22:33] But in general it's like anything right it's just not easy but I think that especially if you're building if you're committed to building open source software it also is very important that you have the transparency on the actual attack and the transparency on the kind of operational side and if the text not transparent then how are you supposed to get hundreds if not thousands of people to kind of rally around actually supporting you.

[00:23:02] And on the flip side if the tech is transparent but it's run by a company then you kind of lose the ability for thousands of people from around the world to kind of collectively come together and arguably that's what made Bitcoin Bitcoin as an example.

[00:23:22] So I think that's what made Ethereum Ethereum and I think there's a lot of other examples of open source software that is accelerated for that reason.

[00:23:31] So I think it's less of a question of like are Dow's good and it's more of a question of you know what's the power of open source software and open communities supporting that software in a transparent way.

[00:23:46] Yes, I mean we had open source software long before we had Dow's and like we have amazing centralized companies that give us perfectly transparent like software for example uniswap right and so like I hear what you're saying but I don't think that that is like the one way to do things in open source crypto world.

[00:24:06] But yeah, you're totally right that that is like the core ethos of like Bitcoin and Ethereum and like the the ethos that brings us together. So definitely hear you on that.

[00:24:16] And I guess like final question before we move on from this topic is like do you have any advice to new Dow's or people about to start Dow's on how to achieve that like channeling of the crowd into concrete goals and into like specific things as opposed to chaos.

[00:24:34] Like what are the things you should do on day one to make sure that this is a good like value added thing as opposed to just like creating a ton of like bureaucracy and confusion and like politics.

[00:24:47] I think I think it's really around being very conscious on what you want the community to have immediate influence around like if you can chop up the pie.

[00:25:01] There's probably a hundred things that people need to make decisions on and I think limiting the decisions to things that matter to those folks and then expanding that decision framework as you really start to accelerate both in product and in organization is probably the number one thing that I recommend right like find those areas that that specific community cares the most about.

[00:25:27] And and give and empower those those community members to have a say an influence on those given things.

[00:25:36] And a lot of the times folks don't care as much around you know the underpinnings of the business assuming that it needs to be transparent still like that's that's the other side right you can have complete transparency of a business especially if it's all on chain like badgers always been on chain there's never been a bad bank account for badger ever to put in perspective.

[00:25:56] So if you have complete transparency but you have smaller groups making decisions that impact that but that can be verified and disputed by the greater ecosystem that's very different from here's a transparency and then everyone also decides on how to impact that right whatever that given kind of sliver of a decision that needs to be made or kind of work stream.

[00:26:21] So yeah that would be the number one thing is like to really try and figure out what do they care about what is the community care about the most that they want to have influence around and then expand that influence over time as it makes sense and as you know the organization starts to grow.

[00:26:39] Yeah yeah it makes a lot of sense so just pay attention to the clock here I want to make sure that we hit the two like main topics of this and the next one

[00:26:50] is I want to just spend a little bit of time talking about the hack and like I think that you know we can talk about what happened we can talk about like just learning about like the specifics of like software and whatever but I think like they're really interesting thing to pick apart is

[00:27:08] like how to handle a hack as a business leader or as a Dow leader and like can you just talk us through a little bit about what it was like going through that from your perspective like maybe we'll start with the story of like how did you find out this is happening what were your first thoughts your immediate first steps like I guess like can you walk us through a day in the life of you know an owner that's getting hacked.

[00:27:32] Yeah yeah so I think you know it's something that you don't wish upon anybody that's involved in any type of product that's committed to developing software and that software you know all the open has a bunch of capital that comes into it and in all those types of things so it's arguably the most challenging time of my life I would definitely say.

[00:27:54] And you know really when you think about you know our hack in particular you know we were one of the you know the first groups to really start participating in what now is emerged to be a very vibrant security researcher community right this is before there was.

[00:28:14] Quote arena Sherlock contest and before there was bug bounties and before you know reentracy attacks were you know the easiest thing to kind of quote unquote block and and all this type of stuff right so we invested enormous amount of time in focus from day zero into security right more so than many others and I think that's part of the reason why the contribute like it kind of set that standard amongst the community and amongst you know anyone that wanted to build with badger that we're always going to kind of shoot to.

[00:28:44] Develop software at that standard and much of it you know because of the risks was focused around smart contract security and obviously you know don't neglect the other types of security that's that's never what should happen or what happened with badger but it was a very unique exploit because it was you know a zero day on a very prominent web to service provider and.

[00:29:14] It was exceptionally calculated over the course of months and months and done in a very professional way it was just kind of call it that compared to some other things you know that we've that we've seen in the past so when the hack actually happened.

[00:29:33] It was obviously like anything all hands on deck and the number one the number one focus was and it continued to be in continues to be like how do we you know have an influence on getting this capital back like.

[00:29:49] Do everything in our power to get this capital back and do it you know in a way that that allows for you know the right parties to be involved like so for us in particular we started by working with you know some of the security analysis and you know those types of companies the mandates of the world the chain analysis of the world.

[00:30:16] To really help us with the sleuthing to figure out like what happened like number one it's like what happened and how do you and how do you understand enough about what happens so can inform you know the recovery process but also.

[00:30:33] How do you get to a place where you can share this publicly with a high level of confidence to help others right so you're immediately in this mode of like what happened us and then what's happening.

[00:30:45] And then who else is at risk and let's reach out to them so so we can just help protect them from you know unfortunate situation and then you're in this you know recovery mode of like how are you actively trying to engage with the hackers and try and get the capital back.

[00:31:03] And and then from that point you're shifting into what does restitution look like right once you start to have a better understanding of the situation and the right parties are involved in all those types of things you know you need to be this shift towards like restitution and one of the things you know one of the biggest pieces of advice that I'd give to people going through a hack are one.

[00:31:28] You don't throw out the principles of the protocol and community because you think you kind of have to just make some swift decisions right we just talked a lot about like Dow decisions you know go from you know a year and a half of making you know decisions amongst thousands of people to five people in a room saying this is how this is going to work and like okay this is now a big boys job no that's not going to work.

[00:31:58] So I'm very proud to say that you know our restitution effort was done completely community driven publicly the way that the entire process for any decision was made it was voted on by token holders it was instituted by token holders and it was something that really showed the power to my earlier point of you know crowdsourced intelligence in the power of the intelligence like you're talking about hundreds of if not thousands of people coming together

[00:32:28] to build a restitution program implement the restitution program for a hundred million dollars in lost capital and like again some of the the most structured well experienced companies in centralized companies in the world couldn't get through something like that never mind you know thousands of random together online doing something like that again so it shows the power but it was really about getting into restitution mode

[00:32:56] and also activating you know the reopening the doors is calling for the products and protocols and there was still a billion dollars plus in this more contracts at the time and things along those lines so that was that's a bit about you know kind of how it all happened

[00:33:14] what some of the first things that you know folks go through and then again it's an ongoing you know we're two two years plus and you know there's still active you know investigation around the capital the funds haven't been recovered

[00:33:28] the restitution program there was actually you know a revision to the restitution program after the first one ended that concluded a month or two ago that the community voted on with impager so yeah that's um that's a bit about it

[00:33:43] cool yeah man I really appreciate you like talking through this extremely difficult time and I I would be remiss if I didn't ask about your personal experience in that moment because in that moment when you're getting hacked like

[00:33:56] you're getting screwed on every single side right like not only are you like a I won't use the word owner again because I understand the connotations of that but like you're a representative of this protocol

[00:34:08] and you're a participant in this protocol and you're a builder of this protocol and like you're the one responsible for like shepherding the community through

[00:34:17] and so I just like that moment is like one of the most stressful like situations that a web three builder can be in is like well at the same time that you are trying to save like your protocol against a hacker your community is like you're making sure they're not turning against you as well

[00:34:37] and making sure that everyone stays all the victims stay together as opposed to turn on each other and I guess just like in that moment for you

[00:34:46] like how was that time like getting through did you find that there was a lot of like conflicting stakeholders that you had to manage did you find that

[00:34:55] community was really behind you and you felt like you you know had the power of these thousand randos like can just talk a little bit about like what it's like to be a founder in that moment

[00:35:05] yeah it's it's something I don't wish on anybody to be totally frank it's it's unbelievably challenging you know I can't it's almost hard for me to imagine and the pile happened but it's hard for me to imagine

[00:35:20] you know something more difficult that I'll go through in my professional career to be total honest like that's how like you talked about some of the facets like it's just all encompassing right

[00:35:32] like you also have the personal study of your life like I have a family I've you know like things like that like there's all that other side and it's again it's it's it's just so it's just so challenging

[00:35:47] and it's so chaotic like if I were to try and reflect on like how I got through it I think it would most like like I think the number one answer for me

[00:35:56] would be like I just stuck to my core principles right I didn't Ryan I refused to let the circumstance in front of me have an impact on changing how I would react to a certain

[00:36:08] circumstance right which is then a product of like you know what are your value and beliefs what are your principles and like anything in life you know how you react to life is your

[00:36:18] decision so I really leaned on you know the principles that I had and in it and I have and it's those principles and those values that allowed me to kind of just push forward

[00:36:31] and do what I was kind of always doing in the roles that I played within the community and in the organization as a whole

[00:36:41] and I again I just didn't steer away from them and I just tackled the same way I'll tackle like a product build and ideation on a new product I tackled you know this

[00:36:51] challenge and did try to do with the highest level of integrity the highest level of transparency not closing any doors to any types of you know influence

[00:37:01] of folks that could have good or bad ideas and again like didn't shy away from what was what worked already within the community right nothing

[00:37:15] kind of changed in terms of the community involvement and the decision making process on something like let's buy the Badger.com domain to how do we handle a hundred

[00:37:27] million dollar hack a lot of the same participants a lot of the same channels a lot of the same forums and forum style all that stuff didn't change

[00:37:37] and I you know I stepped into what I needed to step then step into with this you know unwavering belief that we'd get through it

[00:37:47] and honey badgers are tough as hell and we have a community of honey badgers and we're going to get through this and if you move

[00:37:56] if you set the example of moving away from those principles that's where chaos can ensue so let's let me try my best to set an example

[00:38:07] that then further you know further kind of vibrates throughout all the other participants and I think that's you know what always been the case for folks that have been in you know found

[00:38:21] or built their kind of mode is you know your actions and your words speak very loudly in some instances much louder than you know you're talking

[00:38:35] whatever the heck else however else you want to have influence and the more you can lean on that and that can result in a positive outcome and it not always does right like there's a lot of things

[00:38:46] that I've been the shepherd of that you know in hindsight weren't the best ideas but that's also part of the learning curve so yeah that that would be

[00:38:55] you know in a reflection what I would what I would share yeah man I just want to pull out one thing that you said which I think is incredible

[00:39:03] which is you speak loudest with your actions and like regardless of like your words or your dow votes or like your tokens

[00:39:11] like it's your actions that like set the example and I think that that's like objectively true and and I love that you said that

[00:39:21] I just want to say like thank you again for for helping us understand like how

[00:39:28] like what what is tough about being a founder and crypto is that you like have all of the risks and the stress and like everything

[00:39:36] as a any other founder but on top of that is your users are like inherently financially trusting you

[00:39:42] and inherently like putting not only their time and their accounts or whatever but there's money involved

[00:39:47] and so I think like the question everyone needs to ask themselves is if they're ready to be a founder is in that moment

[00:39:54] when a hundred million dollars is missing and the entire community turns to you are you ready to stand on your principles

[00:40:01] or are you like going to freak out and just figure out what needs to be get done and like the second one sounds good man

[00:40:09] but that's just like always what causes failure and like it's not about what needs to get done

[00:40:15] it's about like core values and why even we're here in the first place

[00:40:19] and I'd say most folks would run away right

[00:40:23] that's just an each of like look look at all the builders from the DeFi summer

[00:40:28] how many of them those founders are around most of them are gone

[00:40:34] and most of them didn't face the challenges that we faced our community

[00:40:40] and in 99% of 99% of the time they would most likely kind of run away or turn their back or who knows right

[00:40:51] again that's what actions are all about and by facing those things head on

[00:40:56] and doing things as you've always done them regardless of the type of circumstance that you're faced with

[00:41:01] or the challenge that you're faced with

[00:41:03] I think that's what then shepherds you know a greater collective change

[00:41:08] and in turn the ability to actually get through it

[00:41:11] for sure so I want to move this conversation to the exciting things that are happening today specifically E-B-T-C

[00:41:18] but I think like the right way to get to that to the product is like why don't you maybe give us like the 30 second version of

[00:41:28] like how the community like now has been hacked has like recup we've created the recovery program

[00:41:37] like we've hit steady state this is maybe like mid 2022

[00:41:42] can you like just kind of talk us through the evolution of like we've recovered

[00:41:47] but like Badger is not what it was before to this new product

[00:41:51] like what happened during that time like what are the conversations and what happened with the DAW

[00:41:56] with the people with the tokens like just get us to E-B-T-C

[00:42:00] yeah no no Rex that's kind of a great kind of way to segue into it because it's an important part

[00:42:06] you just can't skip over I think this thing you know as we came through the restitution program

[00:42:13] it forced you to take and all contributors to take a very very very hard look

[00:42:20] at you know the state of the union right like not only was the capital and treasury state of the union

[00:42:27] something that was had to have been completely ripped to shreds and analyzed and determined like

[00:42:34] you know because how can you say hey here's $10 million a Bitcoin and you know two million tokens

[00:42:40] if you don't know like how much is being spent how much runways there what can go into new R&D investment

[00:42:47] you all that stuff needed to be baked for the restitution program to even have a foundational understanding

[00:42:54] of the data to make a decision and an informed decision

[00:42:58] so in going through that process I think there was quite a bit of a shift amongst contributors to say

[00:43:03] like we need to take a hard look at everything like we can't just look at this

[00:43:08] because you got to remember going into the hack you know this is Bitcoin

[00:43:13] you know going back to all time highs after going to all time highs crash in a 30 all time highs again in the fall

[00:43:20] and the markets you know at its biggest and it's roaring right so to go from that into this

[00:43:28] and then all of a sudden you're coming out of restitution and then all the collapses start right

[00:43:33] it was literally right around the time that you know Tara was about to go down

[00:43:38] and then there was few months before FTX went down and there was a whole slew in between you know those two

[00:43:45] so those just continue to reiterate like there needs to be this community needs to take a hard look at everything

[00:43:53] and there needs to be some real changes because we're in a bear market

[00:43:57] and it's not going to be a three month thing it's going to be a multi year thing

[00:44:01] and if we don't look to make changes now we won't be here on the next side of it

[00:44:08] and I've sent this to people for so long from my experience just building in the space for a couple cycles

[00:44:13] is a lot of the times the number one goal is survival. If you can survive the cycles you're going to make it right

[00:44:20] it's as simple as that like just survive and the landmines are plentiful

[00:44:26] let's call them across the board for both just participants builders everything

[00:44:31] so it was around that time that everything started to get a really hard look

[00:44:35] like what is the profitability of these protocols which protocols are growing which ones aren't

[00:44:39] which ones have the type of kind of potential for you know making changes in adjustments

[00:44:47] and maybe finding product market fit which actually have any fit at all

[00:44:51] what's happening with kind of the token emissions

[00:44:54] what is the decision making framework within the doubt

[00:44:58] how can that be changed what were some of the things we could have done last year

[00:45:02] well before the hack like better manage the treasury right

[00:45:06] that could be that could be optimized if there was a different decision making framework there

[00:45:12] so over the course of I'd say mid 2022 to early 2023

[00:45:19] everything was changed you know all the all the decision making frameworks were evolved

[00:45:28] to have a treasury council and a community council and different types of bodies

[00:45:33] that can help make decisions there was you know clear auditable transparent financial reporting

[00:45:40] of all the products and everything that was part of the doubt ecosystem

[00:45:45] including what's being spent on contracts and all this type of stuff

[00:45:48] it was around this time as well that an operational framework

[00:45:52] so how is there actual legal entity that can support the Dow

[00:45:57] and really help empower the Dow's growth but not control the Dow like how do you create

[00:46:02] this principal agent model versus more of a wrapper approach that most other groups were doing

[00:46:07] and how do we you know how does the emission framework get adjusted

[00:46:12] because like 20 or 30 million dollars was being pushed towards protocols that didn't

[00:46:17] necessarily have the right type of fit so all that stuff

[00:46:20] going to work its way through community decision processes

[00:46:25] and naturally to your point earlier around inefficiencies and speed

[00:46:29] right there was many months of more spending

[00:46:33] and things like that and longer products in market

[00:46:37] that in a more traditional organization probably would have been

[00:46:41] probably would have been discontinued in a much swifter way and things along those lines

[00:46:46] but all those things subsequently happened the community worked their way through

[00:46:50] getting to a point in mid 2023 where all the the yield vaults

[00:46:58] the bridge the interest being Bitcoin the rebasing Bitcoin these things were all discontinued

[00:47:05] they there then was an emission change to pretty much move emissions down to zero

[00:47:11] and only use emissions to in a profitable way to incentivize influence markets

[00:47:18] like on ballot or balancer or our curb and convex or cracks for example

[00:47:23] which made a significant impact on the ability for the doubt to survive

[00:47:27] because there's quite a bit of capital that went into the treasury that

[00:47:31] helped cover the cost during the bear market through those activities

[00:47:36] and throughout all that the question is like what are the contributors

[00:47:40] that are still here because there obviously was a change with the bear market

[00:47:44] want to build right what's everyone excited about building

[00:47:48] we took a lot of swings at Bitcoin is Bitcoin still you know

[00:47:52] the contributors that are here in the community wants to double down on yes no

[00:47:57] okay if it's a yes like where are their opportunities

[00:48:00] what are some of the things how can something be built with all the lessons

[00:48:04] that were learned with the things that we've built before and people that have been

[00:48:08] participated in that and that's what kind of led to what eventually became EBTC

[00:48:15] was looking at you know the gaps in the market

[00:48:20] the pain that came with really building on top of other people's assets

[00:48:27] and protocols right like we talked about the bridge or interest brand Bitcoin

[00:48:31] both of those were a product of rent going under right

[00:48:35] IBBTC was backed by REN BTC and WBTC

[00:48:39] the bridge was built exclusively on REN VM so with both of those going under

[00:48:43] it naturally you know pushed those products to a discontinued state

[00:48:47] but the question then became like what happens if it if those things were not

[00:48:52] so dependent on others as an example and a lot of those decisions

[00:48:57] a lot of those experiences kind of shape with the foundational principles of EBTC

[00:49:01] where was you know we want something that is imutable

[00:49:05] we want something that is decentralized we want something that fills a clear gap

[00:49:10] in the market today that doesn't rely on extraordinary incentives or rewards

[00:49:14] we want something that can be a primitive that other people can build on top of

[00:49:18] that again serves a real need and it's exceptionally composable for what others want to build

[00:49:24] and we really wanted to be as close to the consensus layer as possible

[00:49:28] so that you know we felt like there that that's the brick that can have the building built on top of it

[00:49:33] versus us being you know the 10th brick on you know 20 you know brick building

[00:49:39] to put in perspective right so anyways that's that's a bit of the journey

[00:49:43] that eventually led to it and you know the hack and then in turn the market

[00:49:49] downturn and catastrophe really forced the community and the contributors

[00:49:54] to take a hard look at things through that hard look it pushed you know

[00:49:58] us to a state of kind of going back to the drawing board

[00:50:02] and doing it with the lessons learned and through that process get into where we are today

[00:50:07] cool so what is EBTC? So EBTC I like to say is the most

[00:50:13] capital efficient way to borrow Bitcoin the best place to borrow Bitcoin in the world

[00:50:17] is what I would say so it's inherently a smart contract based boring facility

[00:50:22] similar to you know what we've seen with stablecoin designs or

[00:50:26] collateral debt positions or protocols like die for example

[00:50:31] except it's based on ETH and BTC versus many of the other kind of designs

[00:50:38] which are based on you know assets and a USD equivalent stablecoin

[00:50:44] so really with EBTC the protocol anybody can use ETH to borrow Bitcoin

[00:50:50] and unlimited capacity pay no fees and doing it in an exceptionally

[00:50:55] capital efficient way with two very correlated assets

[00:50:59] and they can have an enormous amount of confidence in the transparency of the system

[00:51:03] the system is and the protocol is exclusively smart contract base

[00:51:08] the code base for those smart contracts are immutable

[00:51:11] it's very governance minimized and all the software is open source

[00:51:15] and all the enormous security rigor all the enormous security rigor that has

[00:51:20] gone into it is also publicly available and what everybody can reference

[00:51:24] and use as they make decisions to build on this software stack

[00:51:28] and or to use the protocol themselves

[00:51:30] and so when we were talking earlier about the first iteration of Badger

[00:51:34] it kind of seems like the major problem that was in front of you guys

[00:51:38] was that once kind of all of the pageantry of like the bull market

[00:51:43] and just like the mania and like once the chaos lifted

[00:51:48] we saw that there wasn't actually a ton of demand for Bitcoin on Ethereum

[00:51:52] can you talk through like why ETH BTC isn't going to run into this problem

[00:51:56] and why like you're able to find demand here that like wasn't able to be

[00:52:01] captured by the things you were building before

[00:52:03] yeah so this protocol in particular like its primary use case

[00:52:07] right is to borrow Bitcoin against it

[00:52:09] and that's what people would use the protocol on its current state

[00:52:13] as more people do that there's now more of this

[00:52:17] exceptionally transparent and more decentralized Bitcoin representation

[00:52:23] that's kind of coming out of this protocol right

[00:52:25] and we naturally we think that there is a large appetite to borrow Bitcoin

[00:52:32] especially when it's significantly more capital efficient than we've seen

[00:52:37] in both off-chain and on-chain borrowing facilities that exist today

[00:52:42] but we think about the potential for kind of this self-sustaining flywheel

[00:52:47] so what I mean by that in driving this Bitcoin appetite and demand

[00:52:51] so it's not that there's like there still is $11 or $12 billion of Bitcoin sitting on Ethereum

[00:52:57] that people are using to borrow dollars

[00:53:00] I think one of the big pain points is there's no way to yield on it

[00:53:03] and I think yield is kind of unlocks an enormous amount of capital

[00:53:07] and potential fit

[00:53:10] and that was kind of part of the design of EBTC

[00:53:13] as we said okay you're gonna make it how do you make it the most

[00:53:17] the best way to borrow Bitcoin well there's no fees

[00:53:19] and it has a lower over the collateralization ratio

[00:53:22] and its super transparent

[00:53:24] okay cool how do you actually do that

[00:53:26] well in our instance the eth is staked that is used as collateral

[00:53:31] and that yield that comes from that collateral

[00:53:35] is shared with the protocol and the user

[00:53:38] right the question that becomes is what do you do with that yield

[00:53:42] as a protocol and of course this is governed by a badger down the treasury

[00:53:47] that could be used to help incentivize the growth and the demand side

[00:53:53] of EBTC the asset

[00:53:56] and that was one of the things that we saw glimpses of how it worked

[00:54:00] in the stablecoin realm and we obviously participated in things like the curve wars

[00:54:05] and stuff along those lines

[00:54:07] but you saw the ability for something like Frax

[00:54:10] to create an enormous growth

[00:54:13] and an overall demand for their stable asset

[00:54:16] by using their influence and share of another ecosystems governance token

[00:54:22] to vote on incentives and things along those lines

[00:54:25] so if you had a sustainable way to drive incentives

[00:54:28] and there really wasn't any other way to earn yield on bitcoin

[00:54:31] on eth in particular is that something that you know

[00:54:35] this structure of this protocol design can help you know

[00:54:39] it's shepherd bitcoin into this kind of new era on Ethereum and indeed fight

[00:54:45] and that's where we thought that this design kind of

[00:54:49] check those boxes

[00:54:51] it allowed for that scale since the system needs to be over collateralized

[00:54:54] that means there's always going to be more collateral than there is EBTC market

[00:54:58] which means there's naturally going to be a boost on the underlying yield

[00:55:02] we think that you know again with the smart contract nature of the protocol

[00:55:09] you could automate the looping

[00:55:12] leverage looping of borrowing EBTC against EAT

[00:55:16] so we almost think about it like well why would someone you know

[00:55:20] borrow BTC against EAT well they're going to be trading the flipping in essentially

[00:55:25] they're going to be long eat against bitcoin that's really what the protocol does

[00:55:29] if you sell the bitcoin that you borrow but then what does that do

[00:55:33] if more people do that there's more yield to influence the people that actually want to hold the EBTC

[00:55:39] so it's almost just like the bitcoin shorters pay the people that want to go long

[00:55:43] bitcoin and you have this system that allows for kind of enhanced yield

[00:55:47] to drop the demand side for the actual asset

[00:55:50] cool man so I guess with the final question here

[00:55:53] what do you think that a DFI that has like really really deep strong EBTC liquidity

[00:56:02] and like has created this new

[00:56:04] sorry has replaced whatever we're using for bitcoin

[00:56:09] with EBTC as like Ethereum's Bitcoin proxy

[00:56:14] like what kind of future how does DFI look different than it does today

[00:56:18] I think DFI looks different in the sense that its foundation is naturally more decentralized

[00:56:26] like look at DFI's foundation it's a product of person formats

[00:56:31] the assets that are used in all these apps

[00:56:34] and the more centralized the assets are inherently the more centralized the apps are

[00:56:39] and DFI as a whole is so there's still a lot of work to be done a lot of work to be done there

[00:56:45] a lot of the most prominent assets are very centralized of those decentralized stablecoins

[00:56:50] or as centralized parameters in different LST and LRT solutions now

[00:56:54] and you know governance tokens and all this stuff

[00:56:57] so I think it just I guess the overall goal and vision of the builders that came together

[00:57:04] to bring EBTC to life was to create something that can live on forever

[00:57:08] and you know if it is adopted it naturally has a positive impact on further decentralizing

[00:57:15] you know the DFI stack as a whole that happens because of the decentralized

[00:57:22] and immutable nature of the smart contracts that power this asset

[00:57:26] so I'd say that's the type of impact if it ever gets to the point

[00:57:30] where it's you know the de facto kind of Bitcoin and DFI

[00:57:35] and there's a most likely a long road to get there too

[00:57:39] yeah but I mean long road to get there means like a lot of opportunities to contribute

[00:57:44] and to grow with it as well so I guess if we're already done we don't need to be making podcasts

[00:57:50] and like continuing building so I take that as a win

[00:57:53] I agree I agree to that

[00:57:55] cool man well Spada I really appreciate this time

[00:57:58] and this is one of those moments where I'm like a little annoyed with myself

[00:58:02] for keeping these episodes to about an hour

[00:58:04] because I think there's so much more that we can go into

[00:58:07] whether it's the like specifics of the implementation of EBTC

[00:58:12] and like how you're going to actually bring this to market

[00:58:14] to grow strategies to like even like what are the next products and that kind of stuff

[00:58:19] but I think for the sake of everyone's time in attention span

[00:58:23] I'm going to cut us off here so Spada again thank you

[00:58:26] your journey is incredible and I think that like your story in the story of Badger

[00:58:30] is like really the most important story anyone willing to walk into Web 3

[00:58:35] needs to like really take deep in their heart which is

[00:58:38] we are in an inherently risky business where people are actually trying to steal your money

[00:58:44] and if you like don't have the values to like stick to

[00:58:49] in those like completely hairy moment whether it's SBF or North Korea

[00:58:53] like you just should not be in this industry

[00:58:56] and if you do have them like look at the things you can achieve

[00:58:59] well said right very well said thank you man

[00:59:02] so before I let you go can you just share with the audience

[00:59:04] how they can find you how they can find Badger

[00:59:07] and if they're interested in either like starting to use EBTC as a defi user

[00:59:12] or like contributing to the project from the down side

[00:59:15] like what's the best way to get involved

[00:59:17] yeah so I'd say for Badger it's easy it's Badger.com

[00:59:21] and you can and there's a variety of different links to the forum

[00:59:25] or a lot of the community discussion the discord

[00:59:28] the social platforms things along those lines

[00:59:31] and then EBTC is easy as well it's EBTC.finance

[00:59:36] they most likely by the time they hear this

[00:59:39] it will be in market and they'll be able to participate with it

[00:59:44] on main net and there should be some fund incentive programs

[00:59:47] and things happening around it as well

[00:59:50] and then me and Sputabum on Twitter

[00:59:53] primarily where I hang out and kind of engage in crypto

[00:59:59] Twitter and all that type of fun stuff

[01:00:01] but yeah thanks again for having me man

[01:00:03] it's been a great conversation.

[01:00:05] No man it was my pleasure and we got to be sure to have you back

[01:00:08] in a few months like once we understand

[01:00:10] where EBTC is going and again how D5 is changing

[01:00:13] totally man. Awesome man we'll have a great rest of your day

[01:00:16] and thanks again. Thank you